Interim Results
UK Coal PLC
05 September 2007
September 5th 2007
UK COAL PLC ('UK COAL')
Financial Results for the six months ended 30 June 2007
Strong growth. Strong outlook
FINANCIAL HIGHLIGHTS
• Operating Profit up 108% to £45.1 million (H1 2006 restated: £21.7
million)
• Pre-tax profit up 143% to £40.6 million (H1 2006 restated: £16.7 million)
• Net assets per share up 32% to £2.06 (December 2006: £1.56)
• Strong growth in value of land and property portfolio
- RICS valuation up 16% to £398 million (December 2006: £344 million)
- Estimate of worth in 2012 up 12% to £900 million (December 2006: £800
million)
• Gearing reduced to 19% (December 2006: 21%)
• Earnings per share 34.2 pence (H1 2006: 11.2 pence)
Commenting, David Jones, Chairman said:
'These good results demonstrate the considerable progress UK COAL has made in
the first half of the year. We have significantly increased the value of our
property business, strengthened the operating performance and prospects of our
mining businesses, more than doubled pre-tax profits and significantly grown the
value of net assets per share.
'In mining, since June, our deep mines have been generating operating profit. In
parallel, production and profit from our surface mines have grown considerably.
We have also made considerable progress both in reducing the proportion of our
total output that is contracted for sale at historic prices and in negotiating
new contracts at today's much higher world market prices. There will always be
risks in mining; but these are very positive developments. In property, we
continue to identify new opportunities and to make very good progress in
securing the appropriate planning consents and progressively executing our
development strategy. These actions have resulted in significant increases in
both the RICS property valuation and in our estimate of the future value of our
property portfolio.
'We view UK COAL's future with considerable confidence and look forward to
delivering further good growth in shareholder value for the full year and
beyond.'
Enquiries:
Media:
Citigate Dewe Rogerson Tel: + 44 (0)207638 9571
Anthony Carlisle Mobile: 07973 611 888
Laure Lagrange Mobile: 07768 698 731
Analysts and investors:
Chris Mawe Mobile: 07778 780 884
Group Finance Director, UK COAL PLC
KEY PERFORMANCE INDICATORS (KPIs) H1 H1 Year
2007 2006 2006
Financial Actual Restated (5) Actual
Net Assets per Share (£/share) 2.06 1.26 1.56
Profit Before Taxation (£ millions) 40.6 16.7 17.6
Net Debt (£ millions) 61.0 59.9 51.8
Net Assets (£ millions) 323.9 188.3 244.1
Property
RICS Valuation (£ millions) 398 293 344
Estimate of land value in 2012 (£ millions) (1) 900 n/a 800
Mining
Coal Sales Price (£/GJ) 1.52 1.39 1.41
Contractual supply commitments (million tonnes) 15.2 24.1 17.9
Price of forward contractual supply commitments (£/GJ) (2) 1.53 1.51 1.51
Period end comparative spot prices (£/GJ) (3) 1.84 1.58 1.62
Deep Mining
Output (million tonnes) 3.3 5.3 8.9
Full Cost of Production (£/GJ) (4) 1.73 1.41 1.56
Cash Cost of Production (£/GJ) (4) 1.48 1.24 1.32
Surface Mining
Output (million tonnes) 0.7 0.2 0.6
Full Cost of Production (£/GJ) (4) 1.29 1.55 1.93
Reserves with Planning (million tonnes) 4.9 4.1 4.1
Reserves in Planning (million tonnes) 3.3 4.4 5.3
To be submitted for planning in 2007 (million tonnes) 4.9 5.9 4.6
Power Generation
MW Hours Generated (thousand MWh) 80 65 120
Number of wind turbines in planning process 9 9 9
(1) Value in 2012 in money of the reporting period
(2) Subject to the outturn of international coal prices and RPI
(3) Including delivery premium. Source: Argus McCloskey coal price index report
(4) Costs exclude Exceptional/non-recurring Items
(5) H1 2006 restated results reflect the 2006 accounting policy change to widen
the Group's definition of an investment property
Half year profit performance by individual business segments is summarised
below.
Profit summary by segment H1 2007 H1 2006 Year 2006
Restated
£m £m £m
Deep mining (15.3) (0.9) (53.2)
Surface mining 4.5 1.2 4.6
Property 54.0 19.9 73.3
Power generation 2.0 1.6 3.1
Joint venture and other 0.2 (0.1) (0.1)
Group profit before interest 45.4 21.7 27.7
Net finance costs (4.8) (5.0) (10.1)
Profit before tax 40.6 16.7 17.6
Overview
UK COAL has delivered a strong set of results, demonstrating the considerable
further progress it has made during the first half of the year in building the
value of its property, mining and power generation businesses. Group pre-tax
profits have been more than doubled to £40.6 million (H1 2006 restated: £16.7
million) and net assets per share have been increased by 32% to £2.06.
We have significantly increased the estimated worth of our property portfolio.
Its estimated future worth by 2012, with the benefit of planning consents, has
increased by some £100 million to £900 million. Property value gains recognised
in half year profits increased to £51.0 million (2006 restated: £18.5 million).
Allowing for the period of non-production at Daw Mill, which we announced in
January, our deep mines performed in line with our forecasts. Their performance
has been turned around, and they have achieved operating profit since June. They
are now well placed to benefit from new sales contracts which we expect to sign
at significantly higher prices reflecting the continued high world demand for
coal.
Surface mines performed well, more than tripling output to 700,000 tonnes and
operating profits to £4.5 million (2006: £1.2 million) at four active sites.
Consent was also gained for a further three sites, giving us a total of 4.9
million tonnes in permitted reserves.
Our power generation business increased output by 23% and profit by 25%. We now
have 29 MW of installed generation capacity. Planning applications have been
submitted for 19 MW of wind turbines, and we intend to apply for a further 6 MW
of turbines by the end of this year.
In May, we announced the intention of Gerry Spindler to step down from the Board
of UK COAL on 1 September and to leave the Group at the end of the year. We also
announced that Jon Lloyd, the Group's Property Director, would succeed Gerry and
he was appointed Chief Executive designate with effect from 1 June 2007. This
handover is proceeding very smoothly. Under Gerry's leadership, UK COAL has
managed transformational change and delivered an outstanding performance. Jon is
already demonstrating the leadership skills and expertise which leave the Board
in no doubt that he will very successfully build on the strong platform the
Group has created.
The Board was further strengthened by our appointment, also announced in May, of
Kevin Whiteman as a non-executive director. Kevin has extensive management
experience in mining from his time with British Coal, and he is also Chief
Executive of Kelda Group PLC. We have also today announced the intention of
Chris Mawe to step down from the Board on September 17 and to leave the Group at
the end of the year. Chris has played a central role in the establishment of
our strong value creation platform; but now that the first stages of this
platform are established, he has decided to look for new opportunities. We
understand and respect his decision. We are delighted, however, to welcome
David Brocksom, formerly Finance Director of Pace Micro Technology, who will
join our Board as Finance Director on September 18, 2007. David has an ideal
mix of skills and experience, and we are confident he will make a powerful
contribution to our team and the continued delivery of our strategy.
We view the future of UK COAL with considerable confidence and look forward to
creating further significant shareholder value during the second half and
beyond.
Review of operating and financial performance
Property: Our property business continues to grow strongly, delivering half year
profits of £54.0 million (2006 restated: £19.9 million). Property valuation
gains were £51.0 million (2006 restated: £18.5 million), and net operating
income from rental and disposals was £3.0 million (2006: £1.4 million).
During the first half year, we received planning consents on three sites,
including a 500,000 sq ft business park at Chatterley Valley in Staffordshire.
In August, we also received consent for around 250,000 sq ft to develop a rail
connected business park at our former Gascoigne Wood mine in North Yorkshire.
Following the receipt of further planning permissions and progress in
developments, the RICS valuation of our property portfolio grew by £54 million
to £398 million, a 16% increase since the end of last year and a 36% increase
since the first half last year.
During this period, an additional 11 sites were added to the 60 originally
identified, giving a total pipeline of 71 projects with a net developable area
of 3,326 acres. These sites provide land for an estimated 29 million sq ft of
employment space along with 20,000 residential units. This has added a further
£100 million to our property portfolio estimate of worth by 2012 which expressed
in today's prices, is now expected to be £900 million.
During the period we have submitted two major Joint Venture planning
applications in Leicestershire at Lounge, Ashby de la Zouch (850,000 sq ft) and
at Coalville (600,000 sq ft). Further significant planning applications are in
progress. In the near future, we expect to receive consents for five other
schemes, including Phase 1 of our major Prince of Wales scheme in Pontefract to
provide 900 houses and 250,000 sq ft of employment space.
We have responded positively to the Government White Paper on the future of the
planning system and a Green Paper on the approach to delivery of an additional
240,000 homes per year through to 2016. We have confirmed that our development
portfolio can play a very substantial role in meeting Government planning and
housing targets in the medium term.
We expect both the RICS valuation and management's estimate of worth, measured
on a half yearly basis, to grow further in the medium term as planning consents
progressively come through.
Coal contracts: In accordance with our strategy, we have reduced the level of
contractual commitments to electricity generators, which had been mainly at
historical fixed rates, to 15.2 million tonnes (2006: 24.1 million tonnes). This
has helped us access rising market prices, and, as a result, we have increased
our average coal sales price by 9%.
Discussions with electricity generators are progressing well and we expect to
secure further contracts in the second half of the year on terms reflective of
current market prices. External support for mining investment through the Coal
Investment Aid scheme has now ended and there are no indications from Government
of a replacement scheme. As a result, further investment decisions will depend
on market conditions and risks involved.
Deep Mining: The period of non-production at Daw Mill in the early part of the
year reduced profit by £20 million against budget expectations and masked an
otherwise satisfactory performance. Our other deep mines met expectations,
despite difficult challenges, including concurrent face changes, major equipment
moves and the introduction of changes in working practices.
In line with our strategy of reducing operating risk in our mining activities,
we sold Maltby Colliery in February to Hargreaves Services PLC for a cash
consideration of £21.5 million. This resulted in a profit on disposal of £12
million following the assumption by the purchaser of associated liabilities,
including the projected pension deficit. The sale has enabled the new owner to
access current market prices in a way that our historic contracts meant we could
not, and this has supported the continued production at Maltby.
Overall, deep mines recorded a loss of £15.3 million (2006: £0.9 million loss)
in the first half, including a £3.0 million charge for redundancy and closure
costs. By May, however, Daw Mill returned to normal operations and our deep
mines have delivered operating profit since June.
Surface Mining: Surface mining performed well despite adverse weather conditions
and has continued to increase output and improve operating performance. We now
have four sites in production and first half output of 700,000 tonnes exceeded
the total output produced during 2006 (570,000 tonnes). Operating profit
increased to £4.5 million (2006: £1.2 million). Planning consents for three
sites have been received in the year, and production is expected to commence at
four new sites by the year-end. Reserves with planning consent amount to 4.9
million tonnes (2006: 4.0 million tonnes).
Power generation: Harworth Power expanded its new mines gas capacity in the
period, increasing power generation by 23% and operating profits to £2.0 million
(2006: £1.6 million). We now have a further 19 MW of wind energy projects in the
planning phase, and we continue to investigate other renewable energy projects
in conjunction with our property business.
Joint ventures: Coal4Energy, our joint venture with Hargreaves Services PLC,
earned profits of £0.3 million (2006: £0.1 million loss). This has progressed
well despite domestic demand being restrained by the mild winter.
Finance costs: Group net finance costs were £4.8 million (2006: £5.0 million)
and include the unwinding of discounts of £2.0 million (2006: £2.2 million).
Costs have benefited from fixed interest rates which cover 69% of our
borrowings.
Taxation: The Group paid nil corporation tax (2006: £nil) in the period. The
Group holds gross capital losses of £411 million, gross trading losses of £242
million and gross timing differences of £146 million available for offset
against future taxable profits. In December 2006 UK COAL recognised a deferred
tax asset of £36 million in relation to pension deficit timing differences. In
June 2007, reflecting the reduction in the pension deficit this related deferred
tax asset fell by £13 million, which is reported through reserves. Since the
overall value of the tax asset has not changed, tax relief of £13 million on
trading losses is reported in the income statement.
Earnings per share: Earnings per share increased by 205% to 34.2 pence. This
includes the effect of £13 million of tax relief on trading losses. Adjusted
earnings per share, excluding tax, were 25.9 pence (2006: 11.2 pence).
Net Assets: Net assets increased by £79.8 million to £323.9 million (December
2006: £244.1 million), and net assets per share increased by 32% to £2.06
(December 2006: £1.56), predominantly as a result of the growth in value of our
property portfolio and the reduction in our pension deficit.
Pensions: Our pension schemes' deficit reduced in the half year to £51 million
(December 2006: £94 million). This reflected benefits from higher forecast long
term interest rates reducing the level of liabilities, good asset returns -
though these have partly reversed since the half year - and £5.2 million of
additional contributions. We have now paid additional pension contributions of
£24 million since 2005.
Gearing: Gearing reduced to 19% (December 2006: 21%).
Net debt and cash flow: Group net debt was £61.0 million (December 2006: £51.8
million). The main cash flows were as follows: £21.5 million was received from
the sale of Maltby Colliery; £9.1 million was invested in deep mines capital
equipment (2006: £10.3 million); a further £5.1 million (2006: £4.5 million) was
paid in redundancy mainly as a result of the final phase of the Harworth and
Rossington rationalisations carried over from 2006; and £5.2 million (2006: £5.2
million) of additional pension contributions were paid. Our land assets are in
certain cases under restoration or remediation and, in the six months £11.2
million (2006: £11.0 million) was spent on this area and claims. A further £5.8
million (2006: £3.1 million) of capital investment was made in property, power
generation and surface mining.
At the end of June the Group had unutilised borrowing facilities of £41.3
million. Since the end of the period, certain elements of our funding package
have been renegotiated. The Group now has assured borrowing and leasing
facilities of £182 million with an average life of 3.1 years.
Dividend: The Group continually seeks to conserve cash to invest in our
property, mining and related businesses. This strategy has been adopted to
improve further shareholder value, preserve financial flexibility and continue
to reduce overall risk. Therefore, the Board is not declaring an interim
dividend, and will review this position as our plans progress further.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
6 months to 6 months to 12 months to
June 2007 June 2006 December
2006
Notes £'000 £'000 £'000
Continuing operations Restated
Turnover 2 146,167 193,341 339,713
Cost of sales 3 (164,285) (190,800) (381,021)
Gross (loss)/profit (18,118) 2,541 (41,308)
Coal Investment Aid 4 1,460 5,145 7,892
Net appreciation in fair value of investment 51,043 18,516 68,622
properties
Profit on disposal of operating property, plant 1,345 156 416
and equipment
Profit on disposal of investment properties 889 37 1,406
Profit on sale of business 4 12,227 - -
Other operating income and expenses (3,767) (4,686) (9,383)
Operating profit 45,079 21,709 27,645
Finance costs 5 (6,234) (6,268) (12,376)
Finance income 5 1,391 1,286 2,261
Finance costs - net 5 (4,843) (4,982) (10,115)
Share of post-tax profit/(loss) from joint 337 (40) 105
ventures
Profit before tax 40,573 16,687 17,635
Tax 6 12,994 - (143)
Profit for the period 53,567 16,687 17,492
Attributable to :
Equity holders of the parent 53,567 16,687 17,492
Earnings per share 8 pence pence pence
Restated
Basic and diluted 34.2 11.2 11.7
The June 2006 figures have been restated following a change in accounting policy to widen the Group's
definition of an investment property.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS ENDED 30 JUNE 2007
6 months to 6 months to June 12 months to
June 2007 2006 December 2006
£'000 £'000 £000
Restated
Actuarial gain on defined benefit pension schemes 35,569 20,529 12,478
Actuarial gain/(loss) on concessionary fuel reserve 2,294 1,019 (855)
Movement on deferred tax asset relating to (12,986) - 35,752
retirement benefit liabilities
Property revaluation on transfer to investment 1,231 - -
properties
Net gain recognised directly in equity 26,108 21,548 47,375
Profit for the period 53,567 16,687 17,492
Total recognised income for the period 79,675 38,235 64,867
Attributable to :
Equity holders of the parent 79,675 38,235 64,867
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Ordinary Share Other Retained Total equity
shares premium reserves earnings
account
£'000 £'000 £'000 £'000 £'000
Group Restated Restated Restated
At 1 January 2006 1,485 1,771 181,965 (35,233) 149,988
New shares issued 8 - - - 8
Profit: six months to June 2006 - - - 16,687 16,687
Actuarial gains on post retirement benefits - - - 21,548 21,548
Accrual for long term incentive plan - - - 89 89
liabilities
Fair value gain on revaluation of investment - - 18,516 (18,516) -
properties
At 30 June 2006 1,493 1,771 200,481 (15,425) 188,320
New shares issued 73 28,985 - - 29,058
Profit: six months to December 2006 - - - 805 805
Actuarial losses on post retirement benefits - - - (9,925) (9,925)
Accrual for long term incentive plan - - - 109 109
liabilities
Movement on deferred tax asset in relation - - - 35,752 35,752
to retirement benefit liabilities
Fair value gain on revaluation of investment - - 53,158 (53,158) -
properties
At 31 December 2006 1,566 30,756 253,639 (41,842) 244,119
Profit: six months to June 2007 - - - 53,567 53,567
New shares issued 3 - - - 3
Actuarial gains on post-retirement benefits - - - 37,863 37,863
Accrual for long term incentive plan - - - 112 112
liabilities
Movement on deferred tax asset in relation - - - (12,986) (12,986)
to retirement benefit liabilities
Fair value gain on revaluation of investment - - 51,043 (51,043) -
properties
Property revaluation on transfer to - - 1,231 - 1,231
investment properties
Disposal of investment properties - - (2,370) 2,370 -
At 30 June 2007 1,569 30,756 303,543 (11,959) 323,909
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2007
30 June 2007 30 June 2006 31 December
2006
Notes £'000 £'000 £'000
Restated
Assets
Non-current assets
Operating property, plant and equipment 227,107 242,729 237,942
Investment properties 9 360,560 265,296 311,677
Investment in joint venture 142 60 205
Deferred tax asset 35,747 - 35,752
Trade and other receivables 964 839 964
624,520 508,924 586,540
Current assets
Inventories 43,691 46,994 36,640
Trade and other receivables 37,666 59,355 47,604
Derivative financial instruments 1,467 - 675
Cash and cash equivalents 10 46,526 51,004 45,928
129,350 157,353 130,847
Liabilities
Current liabilities
Financial liabilities - Borrowings 10 (32,532) (52,553) (19,281)
Trade and other payables (100,195) (88,220) (106,284)
Provisions 12 (35,360) (42,691) (27,931)
(168,087) (183,464) (153,496)
Net current liabilities (38,737) (26,111) (22,649)
Non-current liabilities
Financial liabilities - Borrowings 10 (75,038) (58,383) (78,484)
Trade and other payables (231) (1,370) (312)
Deferred tax liabilities (1,172) (1,029) (1,172)
Provisions 12 (105,771) (116,338) (119,309)
Retirement benefit obligations 13 (79,662) (117,373) (120,495)
(261,874) (294,493) (319,772)
Net assets 323,909 188,320 244,119
Equity
Capital and reserves
Ordinary shares 1,569 1,493 1,566
Share premium 30,756 1,771 30,756
Revaluation reserve 140,873 141,040 141,040
Capital redemption reserve 257 257 257
Fair value reserve 162,413 59,184 112,342
Retained earnings (11,959) (15,425) (41,842)
Total equity 323,909 188,320 244,119
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
6 months to 6 months to 12 months to
June 2007 June 2006 December 2006
Notes £'000 £'000 £'000
Restated
Cash flows from operating activities
Profit for the period 53,567 16,687 17,492
Depreciation/impairment of property, plant and 23,005 24,236 45,577
equipment
Net fair value appreciation in investment properties (51,043) (18,516) (68,622)
Net interest payable and amortisation of discount on 4,843 4,982 10,115
provisions
Net charge for share based remuneration 112 89 198
Net capitalised surface mine development and (6,970) (3,411) (5,382)
restoration costs
Share of post-tax (profit)/loss from joint venture (337) 40 (105)
company
Profit on disposal of investment property (889) (37) (1,406)
Profit on disposal of operating property, plant and (1,345) (156) (416)
equipment
Profit on sale of business (12,227) - -
Decrease in provisions and retirement benefit (11,066) (17,375) (36,246)
obligations
Tax (credit)/charge (12,994) - 143
Operating cash flows before movements in working (15,344) 6,539 (38,652)
capital
(Increase)/decrease in stocks (7,051) (4,826) 5,528
Decrease in receivables 9,938 8,041 18,797
Decrease in payables (6,170) (16,920) (5,073)
Cash used in operations (18,627) (7,166) (19,400)
Financing cost (967) (488) (1,028)
Interest paid (3,280) (3,622) (6,939)
Cash used in operating activities (22,874) (11,276) (27,367)
Cash flows from investing activities
Interest received 1,391 1,286 2,261
Net (payment to)/receipt from insurance and security (2,475) 10,076 9,915
provision funds
Net proceeds from sale of business 21,500 - -
Proceeds on disposal of property, plant and equipment 5,279 6,857 24,191
Net receipts from/(investment in) joint venture company 400 (100) (100)
Development costs of investment properties (2,579) - (3,256)
Purchase of property, plant and equipment (12,327) (13,386) (33,312)
Cash generated from/(used in) investing activities 11,189 4,733 (301)
Cash flows from financing activities
Proceeds from issue of ordinary shares 3 8 29,067
Net drawdown of bank loans 12,552 19,516 8,829
Proceeds from new finance leases 2,663 359 359
Repayment of obligations under hire purchase and (5,410) (5,480) (7,964)
finance leases
Cash generated from financing activities 9,808 14,403 30,291
(Decrease)/increase in cash (1,877) 7,860 2,623
At commencement of period
Cash 3,627 1,004 1,004
Cash equivalents 42,301 52,216 52,216
45,928 53,220 53,220
Reduction in cash equivalents (net receipt from 2,475 (10,076) (9,915)
insurance and subsidence security funds)
(Decrease)/increase in cash (1,877) 7,860 2,623
46,526 51,004 45,928
At end of period
Cash 1,750 8,864 3,627
Cash equivalents 44,776 42,140 42,301
Cash and cash equivalents 10 46,526 51,004 45,928
NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
1. BASIS OF PREPARATION OF INTERIM FINANCIAL STATEMENTS
The interim financial statements have been prepared in accordance with the
accounting policies set out in the Group's statutory accounts.
The half-year figures to June 2006 have been restated to reflect changes in
accounting policy introduced in the financial statements for the year ended 31
December 2006 to widen the Group's definition of an investment property. The
directors have adopted this change as they believe it provides more relevant
information on the position of the Group.
The effect of the change on June 2006 results was to increase net appreciation
in fair value of investment properties by £13.8 million, decrease profit on
disposal of property, plant and equipment by £4.1 million and increase profit
after tax by £9.7 million.
In preparing the interim financial statements, UK COAL has not applied the
following pronouncements for which adoption is not mandatory for the year
ending 31 December 2007 and which have not yet been endorsed by the EU:
IFRIC 11 'Group and treasury transactions'
IFRIC 12 'Service concession agreements'
IFRIC 13 'Customer loyalty programmes relating to IAS 18, Revenue'
IFRIC 14 'The limit on a defined benefit asset, minimum funding requirements and
their interaction'
IFRS 8 'Operating segments'
The Group has chosen not to adopt IAS34 'Interim financial statements' in
preparing its 2007 interim financial statements.
The figures for the year ended 31 December 2006 have been extracted from the
statutory accounts which have been filed with the Registrar of Companies. The
auditors' report on these accounts was unqualified and did not contain a
statement under either S237(2) or S237(3) of the Companies Act 1985. The
half-year figures, which are for the 26 week period (2006: 26 weeks) ended 30
June 2007, have not been audited, but have been reviewed by the auditors.
The auditors' review report is included with the interim financial statements.
The Board approved the interim financial statements on 4 September 2007.
Exceptional Items
Items that are both material and non-recurring and whose significance is
sufficient to warrant separate disclosure and identification within the
financial statements are referred to as Exceptional Items and disclosed within
their relevant income statement category. Items that may give rise to
classification as Exceptional Items include, but are not limited to, significant
and material restructuring and reorganisation programmes, asset impairments and
income from the Department of Trade and Industry in relation to Investment Aid.
Property related transactions, including changes in the fair value of investment
properties and profits or losses arising on disposals of property assets, are
not included in the definition of Exceptional Items as they are expected to
recur, but are separately disclosed on the face of the income statement, where
material.
2. SEGMENTAL ANALYSIS
INCOME STATEMENT - six months to 30 June 2007
Ongoing Deep Closed / Total Surface Property Power Others Total
Mining sold Deep Deep Mining Generation
Mines * Mining
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations
Turnover 112,668 7,345 120,013 21,572 2,522 1,547 513 146,167
Operating (loss)/ (10,139) (1,667) (11,806) 4,937 744 1,708 (71) (4,488)
profit before
exceptional items
within cost of sales
Exceptional items (13,006) (589) (13,595) (35) - - - (13,630)
within cost of sales
Gross (loss)/profit (23,145) (2,256) (25,401) 4,902 744 1,708 (71) (18,118)
Coal Investment Aid 1,402 58 1,460 - - - - 1,460
Net appreciation in - - - - 51,043 - - 51,043
fair value of
investment
properties
Profit on disposal - - 22 1,323 - - 1,345
of operating
property, plant and
equipment
Profit on disposal - - - - 889 - - 889
of investment
properties
Profit on sale of - 11,989 11,989 - - 238 - 12,227
business
Other operating (3,377) 9 (3,368) (469) - 6 64 (3,767)
income and expenses
Operating profit/ (25,120) 9,800 (15,320) 4,455 53,999 1,952 (7) 45,079
(loss)
INCOME STATEMENT - six months to 30 June 2006
Ongoing Closed / Total Surface Property Power Others Total
Deep Mining sold Deep Deep Mining Generation
Mines * Mining
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Restated Restated
Continuing
operations
Turnover 143,553 36,396 179,949 9,879 2,748 256 509 193,341
Operating profit/ 14,319 (11,716) 2,603 1,715 1,493 769 (162) 6,418
(loss) before
exceptional items
within cost of sales
Exceptional items 559 (4,292) (3,733) (144) - - - (3,877)
within cost of sales
Gross profit/(loss) 14,878 (16,008) (1,130) 1,571 1,493 769 (162) 2,541
Coal Investment Aid 4,571 574 5,145 - - - - 5,145
Net appreciation in - - - - 18,516 - - 18,516
fair value of
investment
properties
Profit/(loss) on (74) - (74) 230 - - - 156
disposal of
operating property,
plant and equipment
Profit on disposal - - - - 37 - - 37
of investment
properties
Other operating (4,998) 141 (4,857) (622) (138) 839 92 (4,686)
income and expenses
Operating profit/ 14,377 (15,293) (916) 1,179 19,908 1,608 (70) 21,709
(loss)
INCOME STATEMENT - Year to 31 December 2006
Ongoing Deep Closed / Total Surface Property Power Others Total
Mining sold Deep Deep Mining Generation
Mines * Mining
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations
Turnover 253,473 57,468 310,941 21,661 5,990 293 828 339,713
Operating (loss)/ (10,777) (8,330) (19,107) 1,197 3,286 1,726 (413) (13,311)
profit before
exceptional items
within cost of sales
Exceptional Items 241 (32,365) (32,124) 4,127 - - - (27,997)
within cost of sales
Gross (loss)/profit (10,536) (40,695) (51,231) 5,324 3,286 1,726 (413) (41,308)
Coal Investment Aid 7,118 774 7,892 - - - - 7,892
Appreciation in fair - - - - 68,622 - - 68,622
value of investment
properties
Profit/(loss) on (73) - (73) 489 - - - 416
disposal of
operating property,
plant and equipment
Profit on disposal - - - - 1,406 - - 1,406
of investment
properties
Other operating (10,335) 554 (9,781) (1,185) (14) 1,429 168 (9,383)
income and expenses
Operating profit/ (13,826) (39,367) (53,193) 4,628 73,300 3,155 (245) 27,645
(loss)
* Closed/ sold Deep Mines comprise Rossington and Harworth Collieries as stated
in the 2006 Annual Report, and Maltby Colliery, which was sold in February 2007
The 2006 comparatives include Maltby Colliery within closed/sold deep mines
BALANCE SHEET - As at 30 June 2007
Ongoing Closed / Total Surface Property Power Others Total
Deep Mining sold Deep Mining Generation
Deep Mining
Mines *
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Assets
Non-current assets
Operating property, 169,004 - 169,004 30,939 17,650 9,511 3 227,107
plant and equipment
Investment - - - - 360,560 - - 360,560
properties
Investment in joint - - - - - - 142 142
venture
Deferred tax asset 35,747 - 35,747 - - - - 35,747
Trade and other - - - 475 489 - - 964
receivables
204,751 - 204,751 31,414 378,699 9,511 145 624,520
Current assets
Inventories 35,781 - 35,781 7,910 - - - 43,691
Trade and other 26,256 31,761 3,030 384 1,004 37,666
receivables 5,505 1,487
Derivative - - - - - - 1,467 1,467
financial
instruments
Cash and cash 44,815 - 44,815 - 1,280 - 431 46,526
equivalents
106,852 5,505 112,357 9,397 4,310 384 2,902 129,350
Liabilities
Current liabilities
Financial (1,703) - (1,703) (2,754) 264 (4,696) (23,643) (32,532)
liabilities -
Borrowings
Trade and other (70,854) (444) (71,298) (8,869) (15,906) (62) (4,060) (100,195)
payables
Provisions (12,403) (3,568) (15,971) (18,747) - (132) (510) (35,360)
(84,960) (4,012) (88,972) (30,370) (15,642) (4,890) (28,213) (168,087)
Net current 21,892 1,493 23,385 (20,973) (11,332) (4,506) (25,311) (38,737)
liabilities
Non-current
liabilities
Financial (4,070) - (4,070) (4,690) (64,786) (1,405) (87) (75,038)
liabilities -
Borrowings
Trade and other - - - (49) (182) - - (231)
payables
Deferred tax - - - - (1,172) - - (1,172)
liabilities
Provisions (60,402) (6,497) (66,899) - - - (105,771)
(38,872)
Retirement benefit (74,157) (5,505) (79,662) - - - - (79,662)
obligations
(138,629) (150,631) (43,611) (66,140) (1,405) (87) (261,874)
(12,002)
Net assets/ 88,014 (10,509) 77,505 (33,170) 301,227 3,600 (25,253) 323,909
(liabilities)
BALANCE SHEET - As at 30 June 2006
Ongoing Closed / Total Surface Property Power Others Total
Deep Mining sold Deep Mining Generation
Deep Mining
Mines *
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Restated Restated
Assets
Non-current assets
Operating property, 189,395 14,968 204,363 23,407 10,435 4,521 3 242,729
plant and equipment
Investment - - - - 265,296 - - 265,296
properties
Investment in joint - - - - - - 60 60
venture
Deferred tax asset - - - - - - - -
Trade and other - - - 475 364 - - 839
receivables
189,395 14,968 204,363 23,882 276,095 4,521 63 508,924
Current assets
Inventories 36,434 8,372 44,806 2,188 - - - 46,994
Trade and other 50,991 1,142 52,133 2,031 900 (151) 4,442 59,355
receivables
Derivative - - - - - - - -
financial
instruments
Cash and cash 48,710 2 48,712 - 1,043 - 1,249 51,004
equivalents
136,135 9,516 145,651 4,219 1,943 (151) 5,691 157,353
Liabilities
Current liabilities
Financial (3,366) - (3,366) (2,262) - (920) (46,005) (52,553)
liabilities -
Borrowings
Trade and other (68,909) (2,287) (71,196) (5,123) (9,744) (690) (1,467) (88,220)
payables
Provisions (22,099) (6,475) (28,574) (14,117) - - - (42,691)
(94,374) (8,762) (103,136) (21,502) (9,744) (1,610) (47,472) (183,464)
Net current 41,761 754 42,515 (17,283) (7,801) (1,761) (41,781) (26,111)
liabilities
Non-current
liabilities
Financial
liabilities
- Borrowings (7,794) - (7,794) (631) (49,132) (826) - (58,383)
Trade and other - - - (85) (1,285) - - (1,370)
payables
Deferred tax - - - - (1,029) - - (1,029)
liabilities
Provisions (56,877) (13,578) (70,455) (45,883) - - - (116,338)
Retirement benefit (117,373) - (117,373) - - - - (117,373)
obligations
(182,044) (13,578) (195,622) (46,599) (51,446) (826) - (294,493)
Net assets/ 49,112 2,144 51,256 (40,000) 216,848 1,934 (41,718) 188,320
(liabilities)
BALANCE SHEET - As at 31 December 2006
Ongoing Closed / Total Surface Property Power Others Total
Deep Mining sold Deep Mining Generation
Deep Mining
Mines *
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Assets
Non-current assets
Operating property, 177,841 11,481 189,322 25,708 14,585 8,324 3 237,942
plant and equipment
Investment - - - - 311,677 - - 311,677
properties
Investment in joint - - - - - - 205 205
venture
Deferred tax asset 35,752 - 35,752 - - - - 35,752
Trade and other - - - 475 489 - - 964
receivables
213,593 11,481 225,074 26,183 326,751 8,324 208 586,540
Current assets
Inventories 27,847 5,330 33,177 3,463 - - - 36,640
Trade and other 36,682 106 36,788 2,874 277 764 6,901 47,604
receivables
Derivative - - - - - - 675 675
financial
instruments
Cash and cash 42,335 2 42,337 - 1,042 - 2,549 45,928
equivalents
106,864 5,438 112,302 6,337 1,319 764 10,125 130,847
Liabilities
Current liabilities
Financial (3,564) - (3,564) 1,034 (950) (12,774) (19,281)
liabilities - (3,027)
Borrowings
Trade and other (68,380) (1,530) (69,910) (10,144) (15,247) (4,737) (6,246) (106,284)
payables
Provisions (15,875) (3,382) (19,257) (8,310) - - (364) (27,931)
(87,819) (4,912) (92,731) (21,481) (14,213) (5,687) (19,384) (153,496)
Net current 19,045 526 19,571 (15,144) (12,894) (4,923) (9,259) (22,649)
liabilities
Non-current
liabilities
Financial
liabilities
- Borrowings (7,576) - (7,576) (6,203) (64,383) (344) 22 (78,484)
Trade and other - - - (130) (182) - - (312)
payables
Deferred tax - - - - (1,172) - - (1,172)
liabilities
Provisions (60,909) (13,340) (74,249) (45,060) - - - (119,309)
Retirement benefit (120,495) - (120,495) - - - - (120,495)
obligations
(188,980) (13,340) (202,320) (51,393) (65,737) (344) 22 (319,772)
Net assets/ 43,658 (1,333) 42,325 (40,354) 248,120 3,057 (9,029) 244,119
(liabilities)
* Closed/ sold Deep Mines comprise Rossington and Harworth Collieries as stated in the 2006 Annual
Report, and Maltby Colliery, which was sold in February 2007.
The 2006 comparatives include Maltby Colliery within closed/sold deep mines.
CASH FLOW STATEMENT - Six months to 30 June 2007
For comparative periods see Consolidated Cash Flow Statement
Ongoing Closed / Total Surface Property Power Others To June 30
Deep Mining sold Deep Mining Generation 2007 Total
Deep Mining
Mines *
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash flows from
operating
activities
Profit for the (12,307) 9,800 (2,507) 3,467 51,133 1,850 (376) 53,567
period
Depreciation / 17,036 529 17,565 4,933 92 415 - 23,005
impairment of
property, plant and
equipment
Net fair value - - - - (51,043) - - (51,043)
appreciation in
investment
properties
Net interest 181 - 181 989 2,867 102 704 4,843
payable and
amortisation of
discount on
provisions
Net charge for - - - - - - 112 112
share based
remuneration
Net capitalised - - - (6,970) - - - (6,970)
surface mine
development and
restoration costs
Share of post-tax - - - - - - (337) (337)
(profit)/loss from
joint venture
company
Profit on disposal - - - - (889) - - (889)
of investment
properties
Profit on disposal - - - (22) (1,323) - - (1,345)
of operating
property, plant and
equipment
Profit on sale of - (11,989) (11,989) - - (238) - (12,227)
business
Decrease in (14,773) (6,657) (21,430) 10,364 - - - (11,066)
provisions and
retirement benefit
obligations.
Tax (12,994) - (12,994) - - - - (12,994)
Operating cash (22,857) (8,317) (31,174) 12,761 837 2,129 103 (15,344)
flows before
movements in
working capital
(Increase)/decrease (7,934) 5,330 (2,604) (4,447) - - - (7,051)
in stocks
Decrease/(increase) 10,426 (5,399) 5,027 1,387 (2,753) 380 5,897 9,938
in receivables
Decrease in 2,474 (1,086) 1,388 (1,356) 659 (4,675) (2,186) (6,170)
payables
Cash (used in)/ (17,891) (9,472) (27,363) 8,345 (1,257) (2,166) 3,814 (18,627)
generated from
operations
Financing cost - - - (2) (442) - (523) (967)
Interest paid (434) - (434) (294) (2,529) (103) 80 (3,280)
Cash (used in) / (18,325) (9,472) (27,797) 8,049 (4,228) (2,269) 3,371 (22,874)
generated from
operating
activities
Cash flows from
investing
activities
Interest received 1,428 - 1,428 117 104 1 (259) 1,391
Net receipt from (2,475) - (2,475) - - - - (2,475)
insurance and
security provision
funds
Disposal of - 19,579 19,579 466 - 1,455 - 21,500
businesses
Proceeds on - - - 58 5,221 - - 5,279
disposal of
property, plant and
equipment
Investment in joint - - - - - - 400 400
venture company
Development costs - - - - (2,579) - - (2,579)
of investment
properties
Purchase of (8,073) (1,040) (9,113) (326) (109) (2,779) - (12,327)
property, plant and
equipment
Cash (used in) / (9,120) 18,539 9,419 315 2,637 (1,323) 141 11,189
generated from
investing
activities
Net operating cash (27,445) 9,067 (18,378) 8,364 (1,591) (3,592) 3,512 (11,685)
flow by segment
* Closed/ sold Deep Mines comprise Rossington and Harworth Collieries as stated in the 2006 Annual
Report, and Maltby Colliery, which was sold in February 2007.
The 2006 comparatives include Maltby Colliery within closed/sold deep mines.
3. Cost of sales
6 months to 6 months to 12 months to
June 2007 June 2006 December 2006
£'000 £'000 £'000
Exceptional Items within cost of sales
Harworth - mothballing costs (1,120) (2,326) (10,264)
Harworth - write off of assets - - (3,589)
Rossington - mothballing/closure costs - (1,966) (4,809)
Rossington - write off of assets - - (203)
Stores equipment provision - - (6,527)
Redundancy (1,924) (365) (1,995)
Post retirement benefits 419 780 4,355
Maltby - recovery costs - - (6,973)
Daw Mill -recovery costs (11,005) - (2,392)
Surface mining- reversal of impairment charge - - 4,400
(13,630) (3,877) (27,997)
Other cost of sales (150,655) (186,923) (353,024)
Total cost of sales (164,285) (190,800) (381,021)
4. Exceptional Items
6 months to 6 months to 12 months to
June 2007 June 2006 December 2006
Note £'000 £'000 £'000
Exceptional Items within cost of sales 3 (13,630) (3,877) (27,997)
Other Exceptional Items:
Profit on sale of business 12,227 - -
Coal Investment Aid 1,460 5,145 7,892
Total Exceptional Items 57 1,268 (20,105)
Operating profit before Exceptional Items 45,022 20,441 47,750
Net credit/(charge) for Exceptional Items 57 1,268 (20,105)
Operating profit 45,079 21,709 27,645
5. Finance income and costs
6 months to 6 months to 12 months to
June 2007 June 2006 December 2006
£'000 £'000 £'000
Interest Expense
- Bank borrowings (3,757) (2,953) (6,377)
- Hire purchase agreements and finance leases (466) (669) (1,204)
- Unwinding of discount on provisions (1,987) (2,300) (4,550)
- Discounting of non-current receivables - 142 142
- Amortisation of issue costs of bank loans (967) (488) (1,028)
Fair value gain/(loss) on financial instruments
- Interest rate swaps: fair value hedges 151 - (34)
- Fair value of interest rate swaps 792 - 675
Finance costs (6,234) (6,268) (12,376)
Finance income 1,391 1,286 2,261
Net interest costs (4,843) (4,982) (10,115)
6. Taxation
The tax credit for the six months to 30 June 2007 relates solely to the recognition of previously
unrecognised tax losses. These losses have been recognised at 30 June 2007 due to the reduction in
the deferred tax asset relating to the pension liability and not any change in forecast Group
profitability.
The credit recognised in the consolidated income statement is equal to the charge recognised in the
statement of recognised income and expense, reflecting the fact there is no overall change in the
amount of deferred tax asset being recognised.
Due to the availability of substantial brought forward tax losses for offset against current tax year
taxable profits, there is no further taxation charge in the period.
7. Dividends
No dividends have been paid or proposed in relation to 2006. No interim dividend is proposed for the
six months ended 30 June 2007.
8. Earnings per share
Earnings per share has been calculated by dividing the earnings attributable to ordinary shareholders
by the weighted average number of shares in issue, adjusted for the dilutive effect of share options
potentially issueable under the Group's share option plans, and ranking for dividend during the year,
being 156,673,616 (June 2006: 148,941,767 ; Dec 2006: 150,047,213). At the period end there were no
share options outstanding which could dilute earnings per share in the future.
Adjusted earnings per share, excluding tax, for the six months to 30 June 2007: 25.9 pence (June
2006: 11.2 pence ; Dec 2006: 11.7 pence).
9. Investment properties
6 months to 6 months to 12 months to
June 2007 June 2006 December 2006
At valuation £'000 £'000 £'000
Restated
At 1 January 311,677 251,161 251,161
Additions 2,579 828 3,256
Disposals (2,879) (5,209) (14,023)
Fair value uplift 51,043 18,516 71,674
Transfer from operating property, plant and 8 - -
equipment
Revaluation gain on transfer from operating 1,231 - -
property, plant and equipment
Transfer to operating property, plant and equipment (3,099) - (391)
At period end 360,560 265,296 311,677
The investment properties comprise all properties which are not designated as operating properties.
The properties were valued at 30 June 2007, in accordance with the Appraisal and Valuation Standards
of the Royal Institution of Chartered Surveyors, by Atisreal, Smiths Gore and Bell Ingram,
independent firms with relevant experience of valuations of this nature. The valuation excludes any
deduction of rehabilitation and restoration costs which are stated within provisions in the balance
sheet.
Key assumptions within the basis of fair value are:
- The sites will be cleared of redundant buildings, levelled and prepared ready for development;
- The values are on a basis that no material environmental contamination exists on the subject or
adjoining sites, or where this is present the sites will be remediated by UK COAL to a standard
consistent with the intended use; and
- No deduction or adjustment has been made in relation to clawback provisions, or other taxes which
may be payable.
Certain of the Group's borrowings are secured by a fixed charge over the investment properties.
10. Cash and cash equivalents
30 June 2007 30 June 31 December
2006 2006
£'000 £'000 £'000
Cash deposited to cover insurance requirements 22,029 18,909 19,553
Subsidence security fund 22,747 23,231 22,748
Other cash balances 1,750 8,864 3,627
Cash and cash equivalents 46,526 51,004 45,928
Bank loans and overdrafts (96,676) (94,811) (84,124)
Obligations under hire purchase and finance leases (10,894) (16,125) (13,641)
Net debt (61,044) (59,932) (51,837)
Debt at 30 June 2007 is stated after unamortised borrowing costs of £2,381,000 (June 2006: £2,278,000
; December 2006: £3,331,000).
11. Sale of business
On February 26 2007, the Maltby Colliery was sold to Hargreaves Services PLC (Hargreaves) with a
transfer of operational assets and liabilities, together with the workforce. Hargreaves was the
second largest customer for Maltby. The consideration of £21.5 million resulted in a profit on
disposal of £12.2 million. This includes an estimate of the value of pension liabilities to be
transferred to Hargreaves which will be updated in the financial statements for the year ended 2007.
12. Provisions
1 January Created in Released in Utilised Unwinding of 30 June
2007 period period in period discount 2007
£'000 £'000 £'000 £'000 £'000 £'000
Employer and public liabilities 19,856 1,460 - (2,068) 450 19,698
Surface damage 19,820 3,361 (1,707) (854) 320 20,940
Claims 1,541 7 (750) (11) - 787
Restoration and rehabilitation 51,749 11,661 (1,880) (5,596) 811 56,745
costs of surface mines
Restoration and rehabilitation
costs of deep mines
- shaft treatment and pit top 17,635 940 (3,022) (2,497) 234 13,290
- spoil heaps 4,221 350 (1,062) (205) 52 3,356
- pumping costs 6,614 - (494) - - 6,120
Ground/groundwater contamination 9,768 - (2,545) - 120 7,343
Redundancy 16,036 2,577 (653) (5,108) - 12,852
147,240 20,356 (12,113)* (16,339) 1,987 141,131
Provisions payable within one year 35,360
Provisions payable after more than 105,771
one year
141,131
* Provisions released of £12,113,000 include £6,193,000 relating to the sale of Maltby Colliery
13. Pensions
30 June 30 June 2006 31
2007 December
2006
£'000 £'000 £'000
Retirement benefit obligations - Blenkinsopp 1,299 1,299 1,299
Retirement benefit obligations - Concessionary fuel 21,974 23,670 24,727
Retirement benefit obligations - Industry Wide Schemes 56,389 92,404 94,469
79,662 117,373 120,495
Retirement benefit obligations (Industry Wide Schemes) include £5,505,000 relating to Maltby Colliery which
are expected to be transferred to Hargreaves Services PLC later in the year.
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 20th May 2024
COMPANIES COVERED:
Latest directors dealings
- 9 minutes ago International Personal Finance
- 17 minutes ago Fintel
- 30 minutes ago Hunting
- 31 minutes ago NCC Group
- 34 minutes ago Northern Bear